France releases tax cooperation black list

The French government has published a black list of countries that are deemed uncooperative in tax matters.

The list, signed by French ministers Christine Lagarde and Eric Woerth, comprises 18 countries that have not met the OECD criteria of having concluded a minimum of 12 tax information exchange agreements.

The list is part of a bill that is designed to make investment by individuals and companies in “tax havens” less attractive, by imposing a higher than usual tax burden on passive income from black-listed countries.

Instead of the usual withholding tax of 0 to 33 per cent, France will apply a tax rate of 50 per cent on dividends, interest and royalties for entities domiciled in uncooperative states.

In addition France has abolished the tax deductibility of certain charges on transactions with non-cooperative states and restricted the tax exemption of dividend payments from subsidiaries of French companies domiciled in these locations.

The French is list based on the OECD grey list, which features 23 countries, but excluded five countries that have negotiated tax information exchange agreements with France.

Seven of the 18 non-cooperative states are Caribbean countries, including Anguilla, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines. Four countries, Belize, Costa Rica, Guatemala and Panama, are from Central America.

St. Kitts and Nevis Prime Minister Denzil Douglas feels that France has acted prematurely and “out of turn” as the OECD had given countries placed on its grey list until March 2010 to conclude at least 12 TIEAs.

St. Kitts-Nevis is still three agreements short of the required 12 but has initialled nine agreements which yet have to be signed.

Mr. Douglas said that his government was “told that we would have to wait until these OECD countries carried out their internal bureaucratic processes before we could be given a date or a venue for signature.”

“We were able to sign 8 of these agreements by the end of 2009,” he said, stating that it was extremely unfair “to now be penalised by France for not meeting the required standard of 12 signed tax agreements as we sit and wait for OECD member countries to inform us that they are ready to sign these agreements.”

Grenada’s Finance Minister Nazim Burke in turn believes that his country’s inclusion is simply the case of a bureaucratic mistake, as Grenada has just finished negotiations with France over a TIEA that is going to be signed in the near future.

France together with Germany had pressed for the publication of the original OECD “grey list” at the G20 meeting in April 2009 in London.

Germany in September 2010 announced the publication of its own list of uncooperative countries in connection with a new anti tax evasion law that came into force last year.

Unlike the French legislation the German law targets countries that have not yet committed to tax information exchange.

However, even the countries that are on the OECD grey list have made this commitment.

As a result, Germany’s black list remains empty for the time being.

Any German investors in these countries will only face additional information requirements or a higher tax burden, once there is sufficient evidence that the grey listed countries have not acted on their commitment to exchange tax information.

Mrs. Lagarde

File

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